from the fix-this dept

For many years we've been incredibly critical of the famous Bayh-Dole Act, which was passed in 1980 with the idea that it would encourage greater innovation by pushing universities to patent the research they were doing. The theory -- based on a rather ignorant view of innovation and research -- was that patents would create a market, which, in turn, would enable easier knowledge transfer from academia to industry, leading to a research boom. The actual results have been a near total disaster. What's actually happened are two very bad things. First, it's seriously harmed university research, by guaranteeing much less information sharing between researchers. And, it turns out, that information sharing is a big part of how innovation and big scientific breakthroughs occur. Not surprisingly (if you understand basic economics), when you try to lock up each idea with a patent, researchers (and, more importantly, their administrator bosses), suddenly don't want to share any more. The end result? Lots of important research stifled. What a shame.

The second massive problem in the wake of the Bayh-Dole Act was that every university stupidly thought that it would help make them rich. They bought into the myth of patents and this idea of "tech transfer," and pretty much every research university set up a "tech transfer" office, whose main job was to try to "license" those patents for as much money as possible. University administrators started licking their chops at this potential profit center. But, over the past couple decades, reality has set in. As we've noted for years, ideas are a very, very small piece of the puzzle for innovation. It's the execution that matters. But the folks working in tech transfer offices never understood that and have tried to put ridiculously high prices on their patents, in an attempt to justify their own existence. End result? The exact opposite of the stated goal of the Bayh-Dole Act: less research got transfered into industry, because various tech transfer offices priced it out of the market.

We've pointed out in the past that this expected "profit center" has been a disaster for nearly every university that tried it. With only a handful of exceptions (Stanford, MIT, etc.) tech transfer offices have cost more than they've ever made... while serving to lock up important research, limit collaboration and generally cost the university money that could have gone elsewhere. Oh, and then the trolls came in. We've discussed plenty of times in the past how Intellectual Ventures is the world's largest patent troll, but what few people pay attention to is how it got its patents. That's the nasty secret. The crew at IV saw all the problems with tech transfer offices and saw an opportunity: IV went around from university to university and offered to buy patents in bulk. Desperate tech transfer offices, needing to show some revenue coming in gobbled up the offers, and voila, a giant massive patent troll with tens of thousands of patents was born -- often based on research that was funded by taxpayer dollars.

This appears to be a massive transfer of wealth from taxpayers to billionaire Nathan Myhrvold, thanks to a bad law that has harmed research, damaged the advance of science and knowledge, harmed university finances and decreased actual innovation. Remember, IV has never produced a single product and brought it to market.

Using tech transfer office expenses information, Valdivia estimates that 130 universities did not generate enough licensing income in 2012 to cover the wages of their technology transfer staff and the legal costs for the patents they file. What is more, with 84% universities operating technology transfer in the red, 2012 was a good year because over the last 20 years, on average, 87% did not break even.

In fact, the report notes that just 8 universities made up 50% of the licensing revenue. Basically, you've got a huge number of universities that are a giant cost center whose only job is to hold up innovation.

The report has some suggestions as to how this should change, noting that universities, rather than focusing on patents, should instead focus on helping spin out actual startups. On top of that, Congress should change the law to allow for, at the very least, an exemption for non-profit research or experimentation. Those aren't bad recommendations, but it seems like Congress could and should go much, much further.

Either way, it should be recognized what a complete disaster Bayh-Dole has been for basic research, and how it, indirectly, helped create a massive patent troll. Hopefully Congress will finally wake up to its mistake and fix this.

from the kinda-backwards dept

The state of universities and intellectual property is pretty messy these days. Thanks to the screwed up Bayh-Dole law, many universities feel (wrongly) compelled to patent the research that they produce. This generally goes against their basic charters of sharing the knowledge that they create. It's also not very profitable. Only a small handful of universities have been able to make money off of patents. Most have lost a ton of money, setting up expensive tech transfer offices that don't return a dime.

Think about that for a second. These institutions of learning, who for decades have been built on education and sharing knowledge, want to lock up ideas. And the private companies, who are more commonly associated with trying to lock up proprietary information, are encouraging greater openness and sharing. That, alone, should show you just how screwed up our patent system is today.

from the people-are-dying dept

One of the more horrifying stories of patents costing lives out there is the situation with Genzyme and Fabrazyme. As we detailed, not enough of the drug is being made allegedly due to manufacturing errors by Genzyme (for which it was fined $175 million by the FDA), and its causing serious health problems -- and even death -- to the sufferers of Fabry disease, who are caught in the middle of this. The patients asked the NIH to allow others to make the drug, via a "march-in" order, so that there would be enough supply, but the NIH refused, basically because it said that the patients (you know, the people actually suffering) couldn't make such a request. The end result, of course, is that lives remain at risk. Genzyme is apparently now rationing the drug, only giving 50% of the recommended dosage, despite a study suggesting that such reduced dosages are a problem:

Neither Genzyme nor Mt. Sinai has tested whether the reduced dosage is either safe or beneficial for treating Fabry disease. In fact, in November 2010, The European Medical Agency determined that the lowered dose of Fabrazyme resulted in patients having more strokes, heart attacks, renal disease and other symptoms including severe GI distress and pain and burning in their extremities (neuropathy). It also determined that the lowered dose actually accelerated the course of the disease in some patients. Europe recommended in October 2010 that all patients be given a full dose of Fabrazyme instead of the lowered dose. Genzyme rejected the European assessment and continued to provide only unapproved low doses to patients in the U.S.

The lawyer for some of those patients, Allen Black, alerts us to the news that his clients have now sued Genzyme and Mt. Sinai Medical School over the continuing shortages (pdf). Mt. Sinai is the actual patent holder, with an exclusive license to Genzyme. The patients are arguing for "compensation and punitive damages for lack of adequate treatment and Genzyme's failure to take adequate precautions including keeping a reserve inventory and providing second sources of manufacturing."

Part of the lawsuit is based on negligence claims -- and given the FDA fine, perhaps there's a basis for a negligence claim. The latter part of the case may be more interesting, however. I'm not sure how much of a chance it actually has, though I certainly sympathize with the plaintiffs. At a high level, it may be tough to show that Genzyme has any legal obligation to make enough of the drug (a moral obligation may be a different story). However, the lawyers make a very key point concerning patent law in making this legal argument: that the Bayh-Dole Act actually gives Genzyme a legal obligation.

The Bayh-Dole Act was designed to help universities better commercialize research in order to get those innovations out to market. For a variety of reasons, I've argued that the law has failed significantly in this regard, but these patients are picking up on a key part of Bayh-Dole, which is that the law was put in place to prevent patentees from denying citizens access to publicly funded inventions. It thus may require that certain standards be met when it comes to federally funded inventions -- which Fabrazyme certainly is. The law specifically says that it was put in place to "protect the public against nonuse or unreasonable use of inventions." And since the plaintiffs feel that this is the case here, they're arguing that they're now able to recover damages (though you'd have to imagine they'd prefer full doses). If that argument succeeds, it could lead to a very interesting series of follow-up cases concerning other federally-funded inventions.

from the locking-up-research-is-a-failure dept

For many years, we've discussed how the Bayh-Dole Act, which created incentives for universities to patent the (often federally-funded) research results of professors, has been a dismal failure. The failure is based on the same faulty reason for why people think that patent system itself increases innovation -- even in the face of an awful lot of evidence to the contrary. The mistake is in thinking that the key incentives for research is to extract the greatest dollar value in return, and that the key to commercialization is licensing. Neither is true. In academic settings, research is driven by a variety of factors, many of which have little relation to commercial incentives. Second, the key to commercialization tends to be market need, not licensing opportunity.

But, because of this, tons of universities thought they were going to be rich and set up "tech transfer" offices to help license this new found wealth of patents. Reality hasn't been kind. With a small number of exceptions (the big famous universities like Stanford and MIT), nearly every one of these tech transfer offices have lost money for the universities that set them up. In part, this is often because tech transfer offices like to overvalue the patent, and completely undervalue the actual execution necessary. But, more importantly, the research that comes out in this manner often just doesn't have that much commercial potential -- and a big reason for that may actually be the patents themselves.

By locking up the technology with patents, it's decreased incentives for sharing ideas, which is where real growth and real innovation comes from. The end result is -- entirely contrary to the predictions of Bayh-Dole supporters -- that the law has decreased the output of researchers and decreased the value of that output. In other words, it's done the exact opposite of what it's promised -- and yet we still don't hear any talk of repealing such a dangerous law.

There's now some new research on trying to patent and commercialize university research, this time coming out of Canada, and it, too, has found that there's very little evidence of benefit from patenting and trying to license university research. Effectively, it found that the costs and benefits almost even out.

The latest report is based on survey data from 2008 which finds that the total IP income (primarily from licencing) at reporting Canadian universities was $53.2 million. The cost of generating this income? The reporting institutions employed 321 full-time employees in IP management for a cost of $51.1 million. In other words, after these direct costs, the total surplus for all Canadian universities was $2.1 million. The average income per university from IP was only $425,000. Patent applications and patents issued were actually down in the reporting institutions and there were less than two-dozen spin-off companies reported by the universities.

So, it's another bit of research suggesting this effort to patent university research has not done what it promised to do. So why do politicians still support such laws, when the empirical evidence has long shown that it does not do what those very same politicians promised?

Bayh-Dole, of course, was officially designed to do exactly what Locke is supposedly now looking to do. It specifically gave universities and other organizations the right to patent and control federally funded research, with the misguided belief that this would increase commercialization of federally funded research. The law was enacted thirty years ago, and we can now say, pretty conclusively, that it has failed and has only served to hold back commercialization efforts and to massively stifle federally funded research in a number of areas, through a series of (somewhat predictable, if you understand what monopoly rights do) unintended consequences.

First, tons of universities set up tech transfer offices because of Bayh-Dole. Thinking that the law would suddenly create a new revenue stream in licensing patents, universities spent heavily on setting up such offices to facilitate the transfer of patents to commercial entities. Unfortunately, patents, by themselves, are rarely that valuable, and most universities greatly overestimated the value of their patents. This hurt in multiple ways. Fewer patents than expected were licensable -- and even when a potentially licensable patent came up, the tech transfer office often valued it way too high, such that companies refused to license it, or if they did, were saddled with such debt that they couldn't build a real business. On the whole tech transfer offices have been a huge money loser for the majority of universities.

Second, Bayh-Dole actively stifled important research. Academic research has always been about active sharing of information, with different individuals testing, retesting, and modifying various hypotheses and tests. But with the focus on patenting, suddenly universities didn't want their professors sharing any more, greatly holding back the standard process by which research actually becomes useful.

Third, by focusing on patenting and creating an exclusive right around federally funded research, it limited what fields that research could be applied to for commercialization. That's because often, the licensing would be on an exclusive basis to a single company in a specific field -- blocking out all other potential commercialization routes.

If Locke is serious about improving commercialization of federally funded research, it's time to work with Congress to dump Bayh-Dole. Federally funded research is research paid for with American taxpayer money. To lock it up such that only a single organization can make use of it is a travesty, and is doing tremendous harm to both actual research and commercialization efforts. Instead, it's time to recognize that the drive to innovate comes from market needs and competition, not from gov't granted monopolies.

We've had nearly thirty years to witness that Bayh-Dole failed in its stated purpose. It's time to get rid of it.

from the sharing-the-knowledge-or-grabbing-for-profits dept

We recently discussed how the Bayh-Dole Act, which encouraged universities to look at patenting their research, has done more harm than good for many universities. Because of the Act, many universities set up "tech transfer offices" to try to "commercialize" the research going on at those universities. However, the majority of universities have found that the tech transfer offices have lost them money. That's because (once again) they overestimate the value of the patents themselves (and underestimate the costs of running the transfer office). Now, the Associated Press is highlighting a second problem coming out of this focus on patenting every bit of research: lawsuits with professors.

You would think that a university, whose mission is to help disseminate knowledge, would want to help share ideas. But Bayh-Dole turned many of them into idea-hoarding factories, believing (often incorrectly) that hoarding ideas would bring them profit, thus often stifling research. In the main case described in the article linked above, the University of Missouri gave up trying to commercialize a certain patent developed by a professor at the university. Even so, when the professor tried to reclaim the rights to his own research, for the sake of doing his own startup, the University tried to put in all sorts of strict rules and conditions -- well beyond what it even requires of other organizations it licenses patents to. Thus, the two sides are now engaged in a big lawsuit.

This, of course, hurts everyone. Rather than focusing so narrowly on patenting every bit of research and then trying to squeeze every penny from those patents, you would think that there are much more beneficial ways for everyone to benefit from the research. The professor could build his startup, and the more successful it is, the better it reflects on the University -- who can tout that the research initially came from the university. This, in turn, can lead to new (and bigger) grants and funding for new research, as the university's reputation is greatly enhanced. If the professor remains connected to the university in some fashion, this works out even more. And all of this can be done without patents. In fact, without having the professor license his own research, it keeps the costs down for the startup, making it easier for that startup to succeed. Plus, this would fit well with the recognized value of sharing ideas that come out of academia, rather than trying to hoard them for profit.

from the anyone-other-than-lawyers-and-monopolists-like-these-things? dept

In the last few years, as more and more problems with the patent system have come out, we've seen some defenders of the patent system try to categorize and compartmentalize the problems. They'll say things like "well, maybe patents cause some problems with software" but they're important elsewhere. The problem is that in pretty much every area they claim patents "work" for, the actual evidence suggests otherwise. For example, there's been a belief among many that patents are hugely important to scientists. A few years back, we saw that this wasn't necessarily true, with many scientists complaining about the damage done by patents -- especially when it came to collaborating and sharing ideas -- a key and important element of creating useful and compelling research.

Michael Geist points us to a recent survey of scientists who say that IP protection has a negative impact on their research. It's greatly slowed down the ability to do research, as universities (thanks to the dreadful and damaging Bayh-Dole Act -- which has significantly hurt progress in scientific research) are trying to hoard anything that can be patented for the sake of profit, rather than scientific advancement. Of course, advancement doesn't work that way. It works through collaboration and sharing ideas -- and what patents do is add a huge bureaucracy to the process, encouraging secrecy, not sharing and hoarding, not collaboration. Once again, we're seeing that about the only folks who really truly benefit from patents are the lawyers.

from the privatizing-publicly-funded-research dept

We've discussed, in the past, the infamous Bayh-Dole Act, which tried to push universities to patent more of their research, with the idea that it would make research more commercializable. In fact, the unintended consequences were to significantly harm university research. Universities quickly set up "technology transfer" offices, with the idea of selling off patents for tons of money, but the vast majority of universities discovered that such technology transfer offices cost a lot more than they made, and so they were a drain on university resources (you know, which could have gone to basic research). On top of that, the new focus on patenting everything caused researchers to be much more afraid to share ideas and concepts with colleagues, greatly diminishing the value of research or the ability of researchers to explore other areas where colleagues might have already applied for patents, for fear of "infringing."

However, it looks like Nathan Myhrvold's Intellectual Ventures, which we've discussed at length, in the past, is looking to take advantage of this situation. With so many university technology transfer offices losing money, IV has been going around and signing deals with universities. Basically, IV gives those tech transfer offices some money upfront, allowing IV to effectively add each university's patent pool to its own portfolio that it uses to go around demanding hundreds of millions of dollars from companies to "protect" them against any future lawsuits.

Effectively, the end result is less actual research being done at universities, while some guys who don't actually build anything get rich. And, oh yeah, the companies that actually do stuff are poorer. Doesn't something seem highly suspect about this scenario?

from the a-travesty dept

When we talk about all the harm patents do, some people respond that even if the market can make up for cover the research costs for commercial products, without patents, basic research would never happen. Nothing can be further from the truth. In fact, there's increasing evidence that patents are harming basic research as well. The main arena for basic research has long been universities. Yet, back in 1980, what was supposed to be a "minor tweak" to the patent system, the Bayh-Dole Act, allowed universities to start patenting their research. And, patent it they did. However, as the NY Times notes, rather than foster new research and innovation, this resulted in much less collaboration, much greater secrecy and much higher costs to innovation.

As the article notes, the problem was in making the same mistake that many patent system supporters make, assuming that the invention stage is the most important part of innovation -- when it is not. Invention is just one part of the innovation process. Locking up the invention stage makes every other part of the process of innovation much more expensive, thereby limiting innovation -- and in fact, that's exactly what the Bayh-Dole Act has done:

Part of the problem has been a lingering misunderstanding about where the value lies in innovation. Patenting a new basic science technique, or platform technology, puts it out of the reach of graduate students who might have made tremendous progress using it.

Similarly, exclusive licensing of a discovery to a single company thwarts that innovation’s use in any number of other fields. R. Stanley Williams, a nanotechnologist from Hewlett-Packard, testified to Congress in 2002 that much of the academic research to which H.P. has had difficulty gaining access could be licensed to several companies without eroding its intellectual property value.

As for whether or not it's actually increased the amount of basic research, a study we wrote about earlier this year found that it had actually decreased basic research at universities. And, the story gets even worse, because it's not even as if this ability to patent university research has resulted in huge monetary windfalls for universities either. While some had hoped to hit the jackpot with patents, they failed to recognize just how costly it is to maintain patents and run a technology transfer office. A recent study found that the majority of tech transfer offices had lost money for their universities.

About the only good news in the article is the fact that the steady stream of studies and complaints from within academia about this impact is gradually waking up some to how big a problem the Bayh-Dole Act was in stifling research and innovation in the US. Unfortunately, just getting basic patent reform moving is difficult enough. And since the pharma industry likes Bayh-Dole (since it allows them to sweep in and get all the value from discoveries made at universities -- see The $800 Million Pill to learn about how pharma and biotech companies have abused the system for years), you can bet that they'll put up a huge fight to repeal this incredibly harmful bit of legislation.

from the so-much-for-that-theory dept

If you've read David Levine and Michele Boldrin's excellent book Against Intellectual Monopoly (there's a new version available), you'll see study after study after study showing the same thing: despite the idea that patents are supposed to encourage more research, there's simply no data that stronger patent protections increases the rate of research. In fact, if anything, the evidence suggests the opposite: that stronger patent laws allow researchers to rest on their laurels and use monopoly control to slow down any additional research. Much of this research is available in chapter 8 of their book.

Based on that, it should come as little surprise to see a new study coming out, suggesting that the infamous Bayh-Dole Act of 1980, that tweaked patent law to push universities to patent their research, did not actually cause greater research in the academic space. This is important, because many patent supporters point to the Bayh-Dole Act as being a key point in increasing the commercialization of research coming out of universities, thanks to the various patents. That now appears to be untrue. In the blog post linked above that discusses this, Institute for the Future blogger Anthony Townsend notes at the end "To their [Bayh and Dole's] credit, at least they didn't make things worse." Unfortunately, that's not true. They made things a lot worse. As we noted over two years ago, the Bayh-Dole Act has resulted in universities actively stifling research, using the monopoly powers granted to them under patents to prevent important basic research, driving up costs and slowing down innovation. Researchers are now less likely to share information, which has always been an important part in moving important research forward and figuring out how to build on each other's research for practical applications.

So, despite the common claims by some that Bayh-Dole's tweaks to the patent system helped drive better commercialization of basic research from universities into the market, we now have more evidence that it's done the exact opposite. It didn't increase the amount of research being done at the university level, and rather than encouraging greater innovation, the monopolies granted have helped to stifle innovative research, decrease information sharing and generally drive up the price of research and the commercial applications of that research. That's exactly the opposite of what the patent system was intended to do.